credit card problem

How to deal with balance transfer credit card problems

If you’ve ever made a mistake or had an issue with a balance transfer, read this to learn the easiest way to deal with it.

Balance transfers can be a great way to consolidate and pay down your credit card debt. You could save hundreds or thousands of dollars in interest charges by taking advantage of the lower promotional interest rate. Balance transfers aren’t entirely risk free though, so there are a few traps that you’ll need to avoid.

The most common mistakes that are made with balance transfers can happen at any time throughout the process, whether it is when you’re first applying or when you’re paying off the balance in full. We’ve identified some of the more common mistakes cardholders fall into and strategies you can use should you ever run into any of them.

Problem: Applying for a card with the same issuer

Balance transfer offers come with a wide range of terms and conditions, so you’ll need to meet some eligibility requirements to receive approval.

In the fine print

Tucked away in all the fine print is a clause that says something along the lines of this: “offer is not available for balances transferred from existing credit card accounts with this issuer”. Basically, you have to be a new customer for the credit card issuer to approve your balance transfer at the promotional interest rate. For example, a Westpac customer could not get a Westpac balance transfer credit card.

Underwriting issuers

The other factor to remember when applying for a balance transfer credit card is that some companies offer cards that are actually underwritten by other financial institutions. Citi, for example, is the credit provider for Virgin Money, which mean Citi technically issues all Virgin credit cards.

As a result, existing Citi customers aren’t eligible for balance transfer offers to Virgin Money cards, and vice versa.

The tricky part is that if you do apply for a new credit card with the same issuer, you could be approved for the card – and even the balance transfer in some cases – but not the promotional rates. So there’s potential to end up with more credit cards and no lower interest rate.

The best way to avoid this is to check which banks you can transfer between before applying.

What to do about it

If you accidentally apply for a balance transfer with your existing card issuer, the outcome and solution will depend on which stage of the application you’ve realised the issue. Some of the potential scenarios and strategies include:

  • During the application process.
    If you have just applied for the new credit card, or have just received conditional approval but have NOT submitted supporting documentation, call up the credit card company and cancel the application. Let them know that your existing debt is with the same issuer, and that you have just realised this means you won’t be eligible for the balance transfer offer.
  • If the card application is approved.
    If your credit card and balance transfer is approved, call up the new credit card company and tell them your concerns. Sometimes applications are processed quickly and they won’t identify the problem until they try to transfer the balance. In other cases, you may get approved for the card but not the balance transfer. Calling up to talk to someone stops the problem from getting more complicated, and protects you from any unnecessary charges.
  • If the card application is declined.
    This is most probably because it is issued by the same provider. You can still apply for a different balance transfer card, but just remember that all your applications will be listed on your credit file, and applying for too many in a short amount of time could reduce your credit score.
  • If you actually want to transfer a balance to a card with your existing issuer.
    Some credit card issuers offer balance transfers specifically for existing customers, which gives you a legitimate option if you want to stay with your issuer but choose a different card. NAB, for example, recommends existing cardholders contact them directly for more information on balance transfer options to other NAB cards, while Citi says existing cardholders that are signed up for “my offers” can “take advantage of exclusive offers you may be eligible for including balance transfers”. So if you want a balance transfer deal with your current credit card issuer, look into these options or contact them directly to see what’s possible for your circumstances.

Compare balance transfer credit cards

Rates last updated November 22nd, 2017
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Name Product Balance transfer rate (p.a.) Purchase rate (p.a.) Annual fee Amount Saved Product Description
St.George Vertigo Platinum - Online Offer
0% p.a. for 24 months
12.74% p.a.
$0 p.a. annual fee for the first year ($99 p.a. thereafter)
Platinum card benefits plus 0% p.a. for 24 months on balance transfers (with no BT fee) and $0 annual fee in the first year. Ends 13 December 2017.
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
0% p.a. for 18 months
20.74% p.a.
$129 p.a.
Earn 3 bonus Velocity Points per $1 for the first 3 months, a first year annual fee refund and a yearly $129 Virgin Australia Gift Voucher.
NAB Premium Card
0% p.a. for 20 months with 2% balance transfer fee
19.74% p.a.
$90 p.a.
Benefit from premium perks including travel insurance, Platinum Concierge Service plus 0% p.a. for 20 months on balance transfers.
Citi Platinum Credit Card - 100k Bonus Points
0% p.a. for 15 months with 1% balance transfer fee
20.99% p.a.
$49 p.a. annual fee for the first year ($149 p.a. thereafter)
Earn 100,000 reward Points, take advantage of a long-term balance transfer offer and receive complimentary travel insurance.
ANZ Platinum Credit Card - Exclusive Offer
0% p.a. for 12 months
0% p.a. for 3 months (reverts to 19.74% p.a.)
$0 p.a. annual fee for the first year ($87 p.a. thereafter)
Exclusive to finder, receive 0% p.a. interest on purchases for 3 months and 0% p.a. on balance transfers for 12 months with no balance transfer fee.
HSBC Platinum Credit Card
0% p.a. for 22 months with 2% balance transfer fee
19.99% p.a.
$129 p.a.
Earn 1 Reward Point per $1 of eligible spend and receive complimentary travel and purchase protection insurances.
Bankwest Breeze Classic Mastercard
0% p.a. for 13 months with 2% balance transfer fee
0% p.a. for 13 months (reverts to 12.99% p.a.)
$79 p.a.
Receive 0% interest offers on purchases & balance transfers, up to 55 days interest-free on purchases and free emergency card replacement.
St.George Vertigo Visa - Online Offer
0% p.a. for 18 months
13.24% p.a.
$0 p.a. annual fee for the first year ($55 p.a. thereafter)
Take advantage of 0% p.a. for 18 months on balance transfers (with no BT fee). Plus, $0 annual fee in the first year. Ends 13 December 2017.
Westpac Low Rate Card - Online Only Balance Transfer Offer
0% p.a. for 24 months with 2% balance transfer fee
13.49% p.a.
$59 p.a.
Take advantage of 0% p.a. for 24 months on balance transfers with a 2% balance transfer fee when you apply online by 31 January 2018.
NAB Low Fee Card
0% p.a. for 16 months with 2% balance transfer fee
19.74% p.a.
$30 p.a.
Receive complimentary purchase protection insurance, special offers from Visa Entertainment and up to 44 days interest-free on purchases.
Virgin Money Low Rate Credit Card
0% p.a. for 14 months
11.99% p.a.
$49 p.a.
Receive a discounted annual fee, $100 cashback when you meet the spend requirement and up to 44 days interest-free on purchases.
NAB Low Rate Platinum Card
4.99% p.a. for 6 months
0% p.a. for 9 months (reverts to 13.99% p.a.)
$100 p.a.
A platinum card that offers 0% p.a. for 9 months on purchases. Plus 4.99% p.a. on balance transfers for 6 months.
Citi Rewards Platinum Credit Card
0% p.a. for 24 months with 1.5% balance transfer fee
20.99% p.a.
$49 p.a. annual fee for the first year ($149 p.a. thereafter)
Offers a long-term balance transfer. Earn extra points on eligible international spend, plus complimentary travel insurance.
Woolworths Everyday Platinum Credit Card
0% p.a. for 14 months
19.99% p.a.
$0 p.a. annual fee for the first year ($49 p.a. thereafter)
Receive a $50 eGift Card when you apply by 31 January 2018 and make an eligible purchase by 28 February 2018.
American Express Essential Credit Card
0% p.a. for 12 months with 3% balance transfer fee
14.99% p.a.
$0 p.a.
Get Smartphone Screen Insurance of up to $500 when you pay for your phone or contract with your Essential Credit Card.
American Express Explorer Credit Card
0% p.a. for 12 months with 1% balance transfer fee
20.74% p.a.
$395 p.a.
Receive a $400 Travel Credit every year and up to two entries per year to the American Express Lounge at Sydney International Airport.
Virgin Australia Velocity Flyer Card - Bonus Points Offer
0% p.a. for 18 months
20.74% p.a.
$64 p.a. annual fee for the first year ($129 p.a. thereafter)
Earn up to 60,000 bonus Velocity Points in the first 3 months on eligible spend and enjoy a discounted annual fee of $64 for the first year.
Qantas Premier Platinum
0% p.a. for 15 months
19.99% p.a.
$149 p.a. annual fee for the first year ($299 p.a. thereafter)
Fly further with 75,000 bonus Qantas points, up to 2 Qantas Points per $1 spent and 2 yearly complimentary Qantas Club lounge invitations.
Australian Military Bank Low Rate Visa Credit Card
0% p.a. for 12 months
10.99% p.a.
$49 p.a.
Enjoy up to 55 interest-free days on purchases, add an additional cardholder for $0 and enjoy the convenience of Visa payWave.
McGrath Pink Visa
4.99% p.a. for 8 months
4.99% p.a. for 8 months (reverts to 8.99% p.a.)
$40 p.a.
A basic, no-frills credit card with up to 55 days interest-free that donates half of the card's annual fee to the McGrath Foundation.

Compare up to 4 providers

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Problem: Only getting approval for part of the balance transfer

This issue has to do with credit limits, so let’s start there. When you apply for a balance transfer, issuers usually only allow you to transfer a certain percentage of the credit limit you are approved for on a new card. This often sits between 70% and 95% of the total credit amount. (Note: This is the maximum you can transfer, but you can also transfer a lower amount if you have less debt).

For example, if you wanted to transfer a balance of $5,000, you would need a new credit limit that’s at least 10-35% higher (approximately $5,500 to $6,500).

If you’re approved for a credit limit that doesn’t leave room for this percentage, the issuer may offer a partial balance transfer. In the scenario above, for example, if you were approved for a $5,000 credit limit, the new issuer might transfer $4,500 (90%) of your debt over and leave you with a $500 balance on your old card.

The problem here is that you will end up with two debts – one on the old card and one on the new card. While the new card might have a 0% interest rate, there’s still a risk that you’ll end up paying interest on at least one of the cards – if not both.

What to do about it

If you end up approved for a balance transfer card with a limit that’s too low to allow you to transfer the entire balance, you have two main options:

    • Cancel the application once the new issuer sends you details of the suggested account terms.
    • Pay off the remaining debt on the old card as soon as possible so you can focus on dealing with the rest of it at the lower promotional rate offered on the new card.

*Remember: you should receive information on the new credit card once it is approved, giving you a chance to review the terms and conditions before accepting or declining the new card.

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Problem: Paying more fees than expected

Picture this: you find a great balance transfer card, get approved for it and then have the debt moved over to the new account. Then you get a statement and see a balance that’s hundreds of dollars higher than your old one. What’s going on?

Sometimes balance transfers come with additional costs that we forget about or don’t even realise exist until they show up on our statements, in particular these two:

  • Balance transfer fees. Some credit card companies charge a one-off processing fee for your balance transfer. This fee is usually a percentage of the total transferred, ranging from 2% to 4% depending on the credit card. To put this into perspective, let’s say you’re looking at a card with a 2.5% balance transfer fee. If you wanted to transfer $5,000, you’d pay $125 extra. If you had a $10,000 debt that fee would rise to $250, and so on.
  • Annual fees. If the new credit card has an annual fee, it could be charged when the account is first opened. Meanwhile, if you cancel your old card, you could also be charged one final annual fee, depending on the account terms and conditions. With these fees ranging from $30 to $300 or more, dealing with the extra cost could be very expensive.

Not only do these charges mean you’ll have more debt and a bigger balance to pay off your new credit card, but if the new charges are on the new card, they won’t be eligible for the promotional balance transfer rate. Instead, they’ll be considered “new transactions”, and you will be charged the purchase rate for them (rather than the promotional balance transfer rate).

What to do about it

  • Unfortunately, once you notice these charges it will be too late to avoid them completely. It might be a good idea to go over the terms and conditions of the account, just to be sure that they do mention these fees (if not, you might be able to dispute them). If there’s no cause for dispute, then the best thing to do is prioritise paying these charges off as quickly as possible – even if it means adjusting your budget a little in the process. At least then you can avoid or at least reduce the amount of interest that you pay for them and then get back to paying down your existing debt.
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Problem: Forgetting to make payments

This mistake often comes up with 0% balance transfer offers, which can sound like a great way to not pay debt for months. It’s important to remember that even if there is no interest applied to the balance, you will still have to pay at least the minimum required for each statement period. Otherwise, you could end up dealing with late payment fees and other penalties.

Payments to your old card

Applying for a balance transfer is only the beginning of the process when it comes to moving debt from one card to another. From there, you have to get approval and then wait for the new issuer to process the transfer, which typically takes up to 21 working days.

In the meantime, the balance on your old card will accrue interest as usual and you will still need to make any payments that are due so that you don’t end up with late payment fees or other penalties. A lot of people don’t realise that this is the case with balance transfers, and the result is overlooked or forgotten payments that increase overall debt levels.

What to do about it

  • If you forget to make a payment on your old or new account, contact the relevant credit card issuer straight away. Explain that you have missed a payment and let them know when you plan on making it (or make it straight away and tell them).

Problem: Keeping your old credit card open

When you get a balance transfer credit card, it is your responsibility to decide what you do with the old credit card. That means if you want to cancel it, you will have to go through that process independent of the balance transfer.

If you don’t cancel the old credit card, there could be a temptation to use it to make purchases (and get a bigger balance). It could also attract new interest charges and annual fees, and will also mean you have more statements and payments to deal with every month.

What to do about it

You can cancel the old credit card account at any time with the following steps.

  • Make sure there is no balance on the old card, otherwise it won’t be cancelled.
  • Contact your old credit card company or go to their website and get an account cancellation form.
  • Fill out the form and submit it (or go through the process over the phone).
  • Cancel any direct debits from the account (or transfer them to a different account).
  • Check the details of the cancellation so you know how long it could take to process.
  • Check the account balance again – sometimes credit card companies will charge the annual fee when an account is closed, and it could remain active until you pay that.
  • Request written confirmation from your old credit card company when the process is complete.
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Problem: Making new purchases on a balance transfer card

Any new purchases you make on a balance transfer credit card will be charged interest at the purchase rate, not the promotional balance transfer rate. You won’t be able to take advantage of any interest free days offers, such as “up to 55 days interest free”, which only applies when you don’t have an existing balance.

As banks are forced to repay the balance that’s accruing the highest interest first, your purchases that collect the standard interest rate will be paid off before your transferred balance. Given the low or 0% balance transfer offer is only in place for a set number of months, it’s important to waste that time paying off purchases so you can repay your balance before the offer ends.

In some cases, balance transfer cards may also have a lower introductory purchase rate for the first few months. While this means you pay no interest or a lower rate at first, you will still have a higher balance and could end up with debt when both the purchase and balance transfer introductory rates revert to higher standard rates.

Put simply: making new purchases when you have a balance transfer card is a major risk for paying off your debt and should be avoided at all costs, regardless of the card.

What to do about it

  • If you have used your new card for purchases, make paying off these charges a priority. It’s ideal if you can transfer the money as soon as the purchases are made, so you can get back to paying off the original debt you transferred. At the very least you should aim to increase your monthly repayment amount to factor in this new debt.

Carrying a balance when the introductory rate reverts

Whether the introductory interest rate on a balance transfer card lasts for four months or fourteen, eventually it will revert to the higher, standard rate applied to balances on the card. The difference between these rates could be as much as 25.99%, so if you’re still carrying a balance you will definitely notice the change on your monthly statements.

The interest charges that are applied when rates revert will mean that it takes longer for you to pay down the rest of the debt and cost you more money. So you should always try to clear your balance before the introductory period ends, otherwise you could end up growing your balance again.

What to do about it

  • If you’re one of the many people who end up with a remaining balance when the introductory rate reverts, the priority should be to pay of the debt as quickly as possible. This could mean adjusting your budget and making bigger monthly payments, or using savings or other lump sums of money to clear the balance.
  • Another option is to make weekly payments as soon as you get your salary – even though credit card interest is charged monthly, it’s actually calculated daily, so if you make more frequent payments you can reduce the overall amount of interest that you pay.
  • Balance transfers come with so much fine print that there is often confusion or a lack of awareness about exactly how they work – which can lead to lots of costly mistakes. Now you know how to deal with these kinds of issues, you can get past them and learn from them so that you avoid them altogether in the future.
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6 Responses

  1. Default Gravatar
    LorraineAugust 19, 2012

    What other options are there besides balance transfers to handle credit card debt if you can’t pay it off? Would it be a personal loan if you are unable to do a mortgage top up?

    • Staff
      JacobDecember 14, 2012Staff

      Hi Lorraine. Thanks for your question. We spoke to NAB about this very topic. Here’s a snippet from our conversation.

  2. Default Gravatar
    ShantellAugust 18, 2011

    I am looking at getting a balance transfer for my 2 store cards (overall limits $11,800.) I have 2x interest free purchases on those cards that I DO NOT want to balance transfer. Im not sure how to go about this.

    • Staff
      JacobMarch 28, 2013Staff

      Hi Shantell. You can transfer the balance from multiple store cards; however, I don;t believe it’s possible to select certain transactions to transfer. Perhaps speak to the bank about this. Sorry for the delay in the response.

  3. Default Gravatar
    VanJuly 28, 2011

    Hello, why do these articles not suggest the workaround solution on balance transfer traps: Once the low interest rate period on balance transfer is up, transfer the balance BACK over to your old card, and get a whole new period of low interest rates. Is there any information on this method, and how often it can be done?

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